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What Is Freight Factoring?

In this post-recessionary economy, lenders have implemented incredibly stringent guidelines making it difficult to secure operating capital. For freight carriers, there is an alternative: freight factoring.

Factoring financing involves a factoring company purchasing a trucking company’s outstanding accounts receivable invoices at a reduced rate. Accounts receivable represent all of the debts owed to a company. In turn, the factoring company provides the sorely needed funds to the trucking business.

We Serve

Owner Operators

Small, Mid, and Large Fleets

Freight Brokers

Heavy Haul

Long Haul

Auto Transporters

Oilfield Transporters

Couriers

Many more...

Advantages of Factoring

There are several advantages to freight factoring.

First, business owners may reserve bank financing, due to its scarcity, for substantial and infrequent expenses like tractor trailers and other expensive equipment. Also, lending institutions’ underwriting procedural protocols typically consider a company’s debt load before extending additional credit. With factoring, no additional debt is created.

Secondly, credit challenged companies can still take advantage of freight factoring. The factoring industry standard is to extend funds based on the creditworthiness of the customers as opposed to the trucking company.

Thirdly, factoring companies provides administrative and organizational support. Factoring companies have a vested interest in ensuring that the shippers/customers pay on time. To facilitate timely payment, most factoring companies will manage billing, payments and collection services.

Factoring customers will also vet new customers to ensure their creditworthiness. The delegation of these mundane but essential administrative tasks may prove invaluably helpful to trucking companies especially owner-occupiers. Owner-occupiers drive their trucks and also manage their small business. The transition of these tasks can dramatically free up time and energy of business owners to focus intently on earning more revenue, securing new customer and networking with industry insiders.